The Questor column

By James Quinn

12:01AM GMT 15 Nov 2006

Vodafone numbers worth storing again as strengthening signals point way to growth

VodafoneStock: 135.5p -0.5pQuestor says Buy

Few people can scotch over an £8.1bn write-down with a straight face. But Arun Sarin managed to do just that, almost dismissing Vodafone's impairment on goodwill linked to its German and Italian operations as a minor footnote. Of course, in many ways it is, as it is totally backward looking, totally an accounting - rather than cash - movement, and totally does not affect the way Vodafone should be valued going forward.

What it does do perhaps is highlight the full price that Vodafone paid for its German and Italian operations, and that the landscape in which it now operates is a very different one from the one that used to exist.

Sarin admitted yesterday that its core European operations - including the UK, Germany, France, and Spain - are now "low growth" and the focus in these countries is about keeping an eye on price while reducing costs. When considering that Europe accounted for 54pc of Vodafone's revenue in the first half, it would be easy to get despondent.

Hope comes in the form of what Sarin catchily calls EMAPA. No, not an offshoot of the publishing and radio group, but the area which is basically its emerging markets, Asia Pacific and its Verizon stake in the US. He rattles off a list of countries including Romania, India and Turkey which are all showing strong growth, and seem very hopeful.

Such growth, matched with the continued roll-out of new products alongside internal cost refocusing means that Vodafone is on track to make its full-year earnings guidance, and so the shares are surely worth holding on to on that basis alone.

But what gives Vodafone real momentum is not just the fact that the City is slowly but surely beginning to fall in love with the company again after a considerable hiatus. While announcements like the one concerning the advertising-linked deal with Yahoo! yesterday may not add much to the bottom line in the short term, it is more about the company's mindset.

Sarin and Co. know that they have a superb franchise from which to leverage a whole host of content and extra services - and the next step is to do this, and to get it right. If it can do all that, the shares, at 135.5p last night, look to be well worth buying.

InterContinental Hotels GroupShares: £10.63 +14.5pQuestor says Hold

If there was any doubt about InterContinental's ambitions, just take a look at its strong pipeline of hotel rooms. The group, which also owns the Holiday Inn and Crowne Plaza brands, is already the largest in the world, but it wants to be bigger.

It has 143,000 rooms signed up but not yet open. These rooms, on their own, would equate to the 10th biggest hotel group in the world. The company insists this expansion is necessary, pointing out that demand is still outstripping supply for hotel rooms. Its third-quarter figures, released yesterday, certainly seem to confirm that.

Continuing revenue was up 10pc to £202m in the three months to the end of September. Since then, things have continued strongly, with London's revenue per available room up 18pc in October. The Middle East, even taking into account the hit to its Lebanese hotels, has stormed ahead, with tourists flocking to its hotels in Jordan and Egypt.

The only cloud on the horizon is the possibility of a collapse in consumer confidence in the US, its largest market. Revenue per rooms grew 7.5pc in the quarter across the Atlantic, which is a slight slowdown on the level of growth seen earlier this year.

Questor recommended buying the shares back in August, when they were 898p, pointing out that they were pricey. At £10.63, up 14½p yesterday, they are even more expensive. But they are still worth holding on to. Investors have already received £2.75bn from the proceeds of asset sales, since the company split itself off from Six Continents. The company has promised a further payment, which analysts expect could reach £900m. Don't check out yet.

Great Portland EstatesShares: 612.5p +4.5pQuestor says Hold

Losing out in the race for London Merchant Securities is not such bad news for London property firm Great Portland. It lost out on price alone, and as a standalone business its strong investment case still stands - and is boosted by yesterday's strong results.